Readers Question: The Aussie dollar has appreciated strongly against the USD in recent times. Discuss the consequences of this rapid appreciation for Australia’s Balance of Payments? The Australian Dollar has appreciated against the US Dollar because Large US current account deficit Australia has benefited from rising commodity prices, commodities which Australia produces a lot of. …
Readers Question: when will oil run out? It is difficult to say. Firstly on the demand side, demand for oil is rising faster than many expected. This is largely being driven by rising growth in developing economies such as India and China. Today we consume an average of 85 million barrels daily. According to the …
Readers Question: What credit can the adoption of central bank independence take for the relative stability of the UK business cycle since 1997? The MPC, Bank of England, are responsible for setting interest rates and determining UK monetary policy. They seek to keep inflation close to the government’s target of CPI 2% +/-1 % Between …
1) You say depreciation causes inflation for the three reasons you mention, but later, that in the long run, a higher rate of inflation will cause depreciation. So my first question is how are these two phenomena linked? Is ‘long run’ the key; i.e. it takes a prolonged high inflation to cause a devaluation, but …
Readers Question: If long term Interest rates in the US do not fall, how will this impact the US economy? Short Term Interest rates are governed by the Fed’s Current monetary Policy. These have fallen sharply in recent months from 4.25% to 2.25%. This reflects the Feds desire to avoid an economic downturn. The sharp …
How do we avoid environmental damage in an expanding economy? It is not easy because a lot of environmental damage occurs as a result of negative externalities. In other words, the environmental damage from producing a good, driving a car primarily affects other people. Therefore, free markets are not efficient at dealing with environmental externalities. …
Readers Question: how the unemployment and inflation is related to country’s economy If we take the example of the UK, we can see differing examples of how unemployment and inflation are related to a country’s economy. The key to this question is what causes unemployment and inflation. There are several different factors, but it is …
I was interested to hear that Marks and Spencers will be charging for plastic bags. The idea could be a clever marketing ploy. Most M&S customers have quite an inelastic demand. It is the kind of customer who is quite happy to pay £3 for a ready made meal. If you ready to pay 50% …